5. WHY INVEST IN GOLD
Gold prices show less fluctuations and provide stable returns in the long run.
[ low correlation with other key asset classes ]
5
6. WHY INVEST IN GOLD
200
Equity Returns Gold Returns
150
Great Arab Oil Sub Prime
Asian Crisis
Depression Embargo Crisis
Percent Returns
100
50
0
-50
-100 Japanese
World War 2 Dotcom Bust
Stock Bubble
-150
1929 1939 1973 1989 1997 2000 2007
6
8. WHY INVEST IN GOLD
GOLD IS A FUNDAMENTALLY DIFFERENT ASSET CLASS Gold Price vs. Inflation
$1,200.00
$1,000.00
ï Gold is an economically secure asset i.e. it $800.00
is an asset which is no oneâs liability & $600.00
hence $400.00
ï No risk of inflation $200.00
$0.00
ï No risk of repudiation
1980
1948
1952
1956
1960
1964
1968
1972
1976
1984
1988
1992
1996
2000
2004
2008
Gold Price Inflation Index
ï Gold provides an incontrovertible liquidity
unaffected by exchange controls or asset Gold as a Percentage of Total Reserves
freezes
80
Q1 2001 Q1 2010
60
ï Gold has high public confidence
40
20
ï In the previous decade, most central
banks have increased gold as a 0
percentage of total reserves in apparent
response to perceived uncertainty
8
10. WHAT CUSTOMERS WANT
WHICH IS THE OPTION HOW TO EVADE THE RISKS OF
CAN I SAVE ON PREMIUM
THAT IS EASY TO BUY THEFT & IF I CAN SAVE ON
AND MAKING CHARGES ?
& EASY TO SELL ? LOCKER CHARGES
10
12. CUSTOMER BENEFITS
I PAY NO PREMIUM OR IT IS EASY TO BUY, NO WORRIES OF THEFT &
MAKING CHARGES AND EASY TO SELL I SAVE ON LOCKER CHARGES
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13. GOLD ETF (EXCHANGE TRADED FUND)
Gold ETF are listed on NSE and can be
purchased using a demat account.
Buying GOLD ETF is purchasing gold just like you buy
stock of any company from your broker.
Every unit sold is backed by physical gold.
13
14. GOLD ETF (EXCHANGE TRADED FUND)
Cheapest form of pure physical gold with no premium or making charges
What makes it
attractive? No issues of wastage or impurities like in the case of physical gold
Tax efficient way to hold gold, No Securities Transaction Tax or wealth Tax
Can be easily purchased or sold anytime at transparent real time prices
Can track your investment value in real time
Easy to buy in small lots, 1 unit at a time. (1unit approx equal to 1gm of gold price in spot)
Can build your gold portfolio unit-by-unit to the level you want
No worries of theft and also save on locker charges
Benefit on long-term capital gains
Accepted as collaterals for loans
Holdings in lots of 1000 gms can be converted into physical gold by AMCs
14
15. GOLD ETF FEATURE SPECIFICATIONS
Type of fund Non Equity ETF
Investment In underlying physical gold
Taxation treatment Debt
Unit ~1 gm of gold, typically
Tick Size INR 0.01
Minimum Lot (on Exchange) 1 unit
Minimum Lot (Direct) 1000 units
Expense Ratio ~ 1.00 %
Trade hours Same as cash market
Price As determined on exchange
Trade cycle T+2
90 â 100% is GOLD
Allocation Pattern 0 â 10% is Money market, securitized
debts, bonds and cash at call
15
16. GOLD ETFs listed with NSE
10 GOLD ETFs that you can select from
Unit Size
Name Inception
(gm)
Gold BeES 15-Feb-07 1
UTI-Gold ETF 01-Mar-07 1
KOTAK Gold ETF 20-Jun-07 1
Reliance Gold ETF 15-Oct-07 1
Quantum Gold Fund 24-Jan-08 0.5
SBI Gold ETS 30-Mar-09 1
RELIGAREGOLD 28-Jan-10 1
HDFC MF Gold ETF 25-Jun-10 1
ICICI Prudential Gold ETF 30-Jun-10 1
Axis Gold ETF 20-Oct-10 1
We recommend you contact your broker who will guide you with your selection
16
18. GOLD ETFs COMPELLING COST ADVANTAGE
GOLD PURCHASE (AS ON 07-02-2011)
Jewellers
Banks* Gold ETF
Local#
Standard (purity) 995 999 995
Market Price(per gm) 2,276 2,666 2,156
Adjusted Price (for 995 purity) 2,276 2,653 2,156
Initial Investment (10 gms) 22,755 26,529 21,560
Brokerage - - 108
VAT @ 1% 228 265 -
Net Cost 22,983 26,795 21,668
By buying GOLD ETF, you save more
*Price taken from HDFC Bank website. #Average price is 2-3% over spot price.
. AMC Annualized Charges as applicable on Gold ETF (approx 1%)
*Gold Fund of Funds will cost approx 0.5% more per annum than a comparable ETF because of AMC charges.
18
19. GOLD ETFs COMPELLING TAX ADVANTAGES
Tax Computations
Jewellers Banks Gold ETF
Wealth Tax Applicable Applicable NA
Long Term Capital Gains 3 Years 3 Years 1 Year
Value Added Tax Applicable Applicable NA
For an investor,
a Gold ETF has the most favorable post tax outcome
19
20. COMPELLING LIQUIDITY ADVANTAGES
Liquidating the Assets
Jewellers Banks# Gold ETF
Ability to sell for cash No No YES
Yes , for
Ability to exchange for other asset No NA
Jewellery
Market
Transparency in Exit Price NA NA
price
Exit Load NA* NA ~0.25%**
Gold ETF can be sold for cash at the then-prevailing market price
through an NSE trading member
#Banks are prohibited by RBI from buying back physical gold *No making charges & weight loss for
gold bars/coins **Brokerage. STT is waived.
20
24. GOLD ALLOCATION IN THE PORTFOLIO
We have seen
GOLD IS A SAFE HAVEN DURING CRISES IN THE MARKETS
GOLD HAS PROVED ITSELF TO PROVIDE STABLE RETURNS
HOW GOLD ETFS ARE THE SMARTER WAY TO BUY GOLD : CHEAPER, SAFER & EASY TO SELL
Most money managers recommend
gold allocations of 5% to 20% within client portfolios, depending on risk profile.
Even if you have previously purchased gold ETFs, remember that the proportion of various assets in your
portfolio needs to be adjusted periodically.
Please consult your broker on how much allocation to Gold ETFs in
your portfolio is suitable for you.
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25. DISCLAIMER
This Information Dossier is only an explanatory note prepared by National Stock
Exchange of India Ltd. (NSE) to provide a further clarification to the investors with respect
to investing in Gold ETF. While every effort is made to present accurate and reliable
information, NSE does not endorse, approve, or certify such information, nor does it
guarantee the accuracy, completeness, efficacy or correct explanatory note of the
Gold ETF. The Information Dossier does not constitute an offer or solicitation to invest in
Gold ETF. NSE accepts no responsibility whatsoever for any consequences arising out of
the use of the Information Dossier including any investment decisions taken by the
investors based on this Information Dossier.
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